Will a militaristic Abe torpedo his own leadership?

Last week's 70th anniversary of Japan's atomic bombing was a stark reminder of war's consequences for citizens criticizing Prime Minister Shinzo Abe for what they fear could be a return of military aggression.

For the first time since Abe came to power in December 2012, more people disapprove of his cabinet than support it, according to local media polls in recent weeks. A key reason behind the wane in popularity is Abe's proposal of two controversial security bills that could effectively end Japan's pacifist era. Now, experts are questioning whether those sinking ratings could cost him the title of prime minister.

"Mr. Abe's most pressing challenge is to secure re-election this September as president of the Liberal Democratic Party (LDP). Whether the race will be uncontested depends on whether the prime minister's approval rating continues to deteriorate over the coming weeks," HSBC economist Izumi Devalier said in a report on Thursday.

The role of LDP leader—a position that comes up for election on September 20th—tends to be synonymous with the position of prime minister because the party enjoys absolute dominance in Japan thanks to the absence of a strong opposition party.

Abe's approval rating stood at 41 percent in July, according to a poll by national broadcaster NHK, while a similar survey by newspaper Mainichi indicated a 35 percent reading. Should ratings drop to 30 percent and below, he will likely face a challenger in the LDP race, according to Devalier.

If an LDP rival does challenge Abe, it will also create uncertainty over the election outcome and result in reduced equity inflows by overseas investors into Japanese equities, she added, pointing to historical evidence that shows inflows rising in anticipation of a regime change and falling as a Japanese prime minister enters the declining phase of their leadership.

All this is a new situation for Abe—the mastermind behind Japan's three-year-old economic drive to exit a 20-year old deflationary spiral—who has largely been well-liked throughout his tenure.

"Can there be Abenomics without Shinzo Abe? This is a question that investors have been asking increasingly over the past few weeks," said Devalier.

Citizen anger

The new legislation proposed by Abe allows Japan's military force—called the Self-Defense Forces (SDFs)—to be dispatched abroad without pre-approval from parliament; it also expands the parameters for engaging in military action under the doctrine of collective self-defense.

The bills—which the Japanese cabinet insists are purely defensive in nature—were passed by the lower house of parliament last month and are now due for a vote in the upper house. No specific situations requiring overseas deployment are reportedly being discussed. In the past, Japan has enacted a special law to send noncombat troops into Iraq for limited periods to assist the U.S. with humanitarian and reconstruction operations.

Following Japan's unconditional surrender to the Allies during World War II, Allied forces led by the U.S. demanded complete demilitarization and disarmament, putting in place the current pacifist constitution that denies Japan the right to declare war.

Recent large-scale protests indicate citizens believe the current bills could trigger outright war, according to local media reports - a plausible concern given Japan's ongoing conflict with China concerning disputed territory known as the Senkaku Islands in Japan and the Diaoyu Islands in China.

"The main driver of the normalization of the SDF towards a conventional military force is the desire to adapt to China's perceived aggressive behavior," said Alison Evans, senior analyst of IHS Country Risk, said in a July note.

Nagasaki Mayor Tomihisa Taue expressed those worries on Sunday at the 70th anniversary of the city's atomic bombing, which happened a few days after Hiroshima was destroyed.

"There is widespread unease and concern that the oath which was engraved onto our hearts 70 years ago and the peaceful ideology of the Constitution of Japan are now wavering. I urge the government and the Diet to listen to these voices of unease and concern, concentrate their wisdom, and conduct careful and sincere deliberations," he said in a speech.

Moreover, Abe's heavy-handed approach to ensuring the passage of the bills, which has reportedly included strong-arming the media to silence criticism, has also alienated supporters.

"These [tactics] have included more aggressive complaints to the bosses of critical journalists and commentators, and more blatant retaliation against outlets that persist in faulting the administration. At the same time, Mr. Abe has tried to win over top media executives and noted journalists with private sushi lunches," the NYT reported in an April 26 feature.

A stormy September

"The political schedule implies that Mr. Abe's approval rating is unlikely to recover in time for the September Liberal Democratic Party presidential elections - the risk is for further deterioration," Devalier said, pointing to two major upcoming events that could further fuel public backlash against the government.

First up is the restart of Kyushu Electric Power Company's Sendai nuclear power plant on August 11, which will mark the first time nuclear power will come back online since September 2013. Nuclear power remains a hot-button topic amid citizens following the deadly meltdown at Tokyo Electric Power Company's Fukushima power plant in in 2011.

A recent NHK poll revealed that only 32 percent of people surveyed favored the restart of the Sendai plant.

Second is a parliamentary rule set to go into effect on September 14, that will see bills return to the lower house in the event of rejection or inaction from the upper house. Should that happen, the bills' success will be guaranteed since the LDP-led coalition holds a comfortable two-thirds majority in the lower house, explained Tan Ming Hui, associate research fellow at Singapore's Nanyang Technological University, in a note this week.

But the public may interpret that as the government stifling debate surrounding the bill, which will deepen discontent, Devalier warned.

To be sure, HSBC's views aren't shared by all.

Yoshiaki Iizuka, managing director and head of research at Tokyo-based Rogers Investment Advisors, told CNBC that he did not anticipate the Prime Minister to lose September's party vote.

"He doesn't have any competition from within the LDP. His biggest political rival was [former LDP secretary-general] Shigeru Ishiba, but that's no longer the case since Ishiba accepted Abe's cabinet post. If he was serious about running for LDP leader, he wouldn't have accepted."

Ishiba is also a former Minister of Defense, who nearly defeated Abe at the 2012 LDP presidential elections, but tensions between the two have lessened since Ishiba became a cabinet minister last year and threw his support behind the Abe administration.